According to forecasts, many businesses are looking to acquire and/or merge with another business. Many are looking at globalisation as an opportunity for growth. And the vast majority don’t plan on selling the business until the distant future, if at all.
What does this mean? It means that it’s up to you to grow the business to its full potential. And regardless of whether you are an early stage or fully established company, this means you’ll need capital.
So blow the dust off that strategic business plan and send it to … but wait. What are lenders looking for in a business plan these days? Are there ways to sharpen your plan to ensure you are attracting not only world-class lenders, but also the right types of lenders? We think the answer is yes!
Overall, what do lenders look for in a business plan?
Ideally, you should develop a five-year plan that includes pro forma income statements, balance sheets, and cash flow statements on a monthly basis. Annual projections will not show seasonality and working capital fluctuations. The overall goal is to generate high levels of lender or investor enthusiasm for your deal – in just a few minutes of reading.
Here are six tips that will help your plan shine for all types of lenders:
- Use clear and understandable language that explains the business in terms of its underlying processes.
- Explain why the business is unique and specialised. This is most effectively articulated by breaking the business into its functional process components (FPCs) and highlighting the degree of difficulty of each FPC.
- Be quantifiable and measurable. Use a sound financial metric foundation, based on historical financial performance, to back up your specialisation and underlying processes.
- Tie together the numbers and the narrative. The financial metrics and the narrative description should support each other, and be easily connected.
- Describe a simple growth story that is tied into an overall strategic plan so that the reader can see how the business will get from point A to point C.
- Spell out what the capital will be used for. For example, is it for acceleration of organic growth, to support an acquisition, or to fund a shareholder buy-out?
What else? Let’s start with banks.
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